From the 6th of April 2026, the basic dividend tax rate will increase from 8.75% to 10.75%, and the higher rate will increase from 33.75% to 35.75%. If you are company director who is also a shareholder, it would be a good time to review your dividend strategy.
At Hanley & Co. Accountants, this month’s blog looks at the latest dividend tax changes and what you need to know. For more information, call us near Kendal on 01539 821869.
What is the Current System?
In the UK, you can earn up to £12,570 a year without paying tax. This is known as the Personal Allowance. Once you exceed this threshold, you are taxed at between 20% and 45%, depending on your taxpayer status.
On top of the Personal Allowance, there is a separate Dividend Allowance where you only pay tax on any dividend income above £500.
Who is Affected?
These changes will affect company directors who are also shareholders who take income through dividends. It will also affect shareholders with investment portfolios outside ISAs or pensions, and those whose overall dividend income exceeds the £500 allowance.
Planning Opportunities to Consider
There are still legitimate ways to manage your tax liability on dividends. Some options include:
Making full use of ISA allowances for investments
Timing dividend payments across tax years
Pension contributions as part of a wider strategy
Reviewing shareholdings between spouses or civil partners
Practical Steps to Take Now
If you receive dividends, it is important to keep detailed records of all dividends payments you receive and check whether you need to register for Self-Assessment.
It is also important you review your tax position annually, to ensure previous advice still applies. Tax rules are ever-changing, and even a small change in your income or tax threshold can shift your position significantly.
How Can We Help?
At Hanley & Co. Accountants, we help clients with recent tax changes and how they may affect them. By providing clear and practical advice, we can support your tax or business matters.
If you are unsure how the dividend tax changes affect you, we are more than happy to help.
Contact Hanley & Co. Accountants
For advice, contact Hanley & Co. Accountants, near Kendal. Serving across Cumbria, call us on 01539 821869. Alternatively, send us a message via our contact form and we will be in touch.
